Creditors Turnover Ratio = Credit purchases / average trade creditors
= (Total Purchases – Cash Purchases – Purchase Returns) /(closing creditors + closing Bills payable)
= (4,00,000 – 50,000 – 20,000) / (60,000 + 20,000)
=(3,30,000 /80,000)
= 4.13 times
Average payment period = 365 /Creditors Turnover Ratio
= (365 /4.13)
= 88 days (approx.)